Coronavirus expected to push mortgage rates slightly higher

Mortgage application form
Mortgage application formPhoto: BrianAJackson/DepositPhotos

For the first time in a long time, the mortgage interest rates in the Netherlands are expected to rise instead of fall - due to the economic uncertainty the coronavirus is causing, according to ABN Amro. 

The bank previously forecast that interest rates would fall further, even though the mortgage interest rate was already historically low. But that prediction was made before Covid-19 spread to Europe and the Netherlands.

The virus brought public life to a near halt and that has consequences for the economy, ABN Amro said on De Hypotheker. People can't go to work, meaning that production is stagnating, and consumer spending is declining. Companies' profits are disappearing, leading to uncertainty on the financial markets.

And the expected credit losses mean that banks are having a harder time attracting money for loans.  Central banks are willing to provide cheap money to banks on a large scale and keep bond yields low through buying programs, but borrowing money will likely still become more expensive. 

"It is therefore plausible that the mortgage interest rate will rise slightly rather than fall, as we previously expected. This applies to both short-term and long-term fixed rate loans," ABN Amro said.